Wall Street's major indexes opened lower on Monday, extending last week's losses, as a selloff in AI and semiconductor stocks weighed on the market. The Dow Jones Industrial Average fell 153 points, while the S&P 500 dropped 0.74% and the Nasdaq Composite slid 1.22%.
AI stocks retreat on safety concerns
The decline was led by major AI-related names, with Nvidia falling about 3.8% and Amazon down 1.32%. Other chipmakers, including Broadcom, AMD, Intel, and Marvell Technology, dropped between 4% and 8.8%. The selloff followed calls from prominent AI executives, including Anthropic CEO Dario Amodei, for a slower pace of AI model development due to safety concerns. OpenAI's Sam Altman and xAI's Elon Musk supported the proposal.
Investors are reassessing the enthusiasm that has driven a massive rally in AI stocks, as a slower development pace could reduce the need for heavy capital expenditure in AI infrastructure. This poses a risk for companies that have benefited from the rapid expansion of AI spending. However, the impact was not uniform: software firms like ServiceNow rose 5.6%, while Adobe and Workday gained 3.8% and 4%, respectively. Meta and Alphabet also advanced.
Some analysts question whether the AI selloff will be sustained, given the lack of clarity on how any slowdown would be implemented. The debate comes amid broader concerns about valuations in the sector, as highlighted by recent slumps in AI chip stocks.
Oil surge adds to market pressure
Rising oil prices added another layer of uncertainty. Brent crude climbed over 4% to $109 a barrel, while West Texas Intermediate gained about 3% to $103.98, after Saudi Arabia shut a key pipeline that bypasses the Strait of Hormuz. US crude had already moved above $100 last week for the first time since May amid Middle East tensions.
The energy price spike comes as investors prepare for the Federal Reserve's September policy meeting. Fed funds futures are pricing in an 88-89% probability of a rate hike, according to CME's FedWatch tool. Accelerating US inflation and higher oil prices could complicate the central bank's decision, potentially adding to the pressure on equities.
Last week, the Dow fell 1.6% for its biggest weekly decline since March, while the S&P 500 and Nasdaq lost about 0.8% and 0.7%, respectively. The ongoing AI safety debate has also sparked demand fears in memory stocks, adding to the tech sector's woes.
As the market navigates these headwinds, investors are closely watching the Fed's decision and oil price movements for further direction. The combination of AI valuation concerns and energy-driven inflation could keep volatility elevated in the near term.
This article is for informational purposes only and does not constitute financial advice.
